Oil prices surged by more than $2 on Wednesday after Iran dismissed hopes of diplomatic progress with the US, pushing Brent crude to near five-month highs. Brent crude futures climbed $2.06, or 1.9%, to $110.85 a barrel, while US West Texas Intermediate crude rose $2.13, or 2.2%, to $99.95. The rally came despite earlier discussions on mediation efforts between Iran and the US, which had briefly eased prices.
Iran's Foreign Minister Abbas Araqchi told the Financial Times that the country was prepared to defend itself, while President Masoud Pezeshkian warned the US against expecting dialogue amid ongoing blockades and threats. Analysts at PVM noted that geopolitical tensions in the Middle East and the Russia-Ukraine war continued to fuel bullish sentiment in the oil market.
Recent attacks on oil tankers and Saudi Aramco facilities by Iran-aligned Houthis have further heightened concerns. Kpler data showed 18 vessel attacks in the past two weeks, with LSEG analysts warning that Iran was targeting tankers beyond the Strait of Hormuz, disrupting crude loadings in the Gulf of Oman. Meanwhile, US officials said they were working with global refiners to increase fuel output.
US crude inventories fell by 4.9 million barrels in the week ended October 16, with gasoline and distillate stocks also declining, according to API data. The drop in inventories provided additional support to oil prices, reinforcing the market's upward trend.